Key Takeaways
- • Goldman Sachs prime brokerage reported that for the first time since Covid, all three of its broad equity hedge fund strategy categories fell more than 1% on the same day, with more than two-thirds of hedge funds finishing down.
- • Global fundamental long/short funds fell 1.4%, global systematic long/short funds fell 1.3%, and multistrategy platforms dropped 1.9%, the second-worst performance since the April 2025 tariff-driven selloff.
- • The Nasdaq 100 fell 2.9%, its biggest decline since June, as heavy selling in US tech reflected doubts over whether massive AI budgets will deliver returns, alongside concerns that higher oil could stoke inflation.
- • Concentrated short positions were squeezed higher in the second half of the session, amplifying losses across the hedge fund universe.
- • Asia-focused fundamental long/short managers were down 9.3% month to date, though still up 14.2% for the year.
Summary
Goldman Sachs's prime brokerage reported a broad hit to hedge funds following Thursday's equity slump, one of the most widespread setbacks for the sector since the Covid era. In its client note, Goldman said that for the first time since Covid, all three of its broad equity strategy categories fell by more than 1% during the same session, and that more than two-thirds of hedge funds finished the day lower as concentrated short bets were squeezed further in the back half of the session.
By strategy, global fundamental long/short managers fell 1.4% at the close, their worst daily showing since July 16. Funds focused on telecommunications, media and technology slid an average of 2.7%. Systematic long/short funds declined 1.3%, which Goldman characterized as their third-worst day since December 2023. Multistrategy platforms, which are designed to buffer firm-level drawdowns, dropped 1.9%, their second-worst performance since the tariff-driven selloff in April 2025. Asia-focused fundamental long/short managers also lost ground, leaving them down 9.3% for the month to date, although the group remains up 14.2% for the year.
The decline coincided with a sharp move in US equities, with the Nasdaq 100 falling 2.9%, its largest drop since June. According to Goldman, the selling was concentrated in US technology amid growing doubts over whether heavy AI infrastructure budgets will deliver adequate returns, while worries that higher oil prices could reignite inflation added to the pressure.
The session fits a year of sharp swings around AI-linked names. Rallies in companies such as SK Hynix and Micron Technology have been repeatedly interrupted by abrupt declines. Earlier in the year, a slump across technology pushed the hedge fund Situational Awareness to the edge, raising concern that the AI-driven rally could be losing momentum. Goldman's data underscores how factor swings and crowded positioning can amplify losses across the industry at the same time.
By strategy, global fundamental long/short managers fell 1.4% at the close, their worst daily showing since July 16. Funds focused on telecommunications, media and technology slid an average of 2.7%. Systematic long/short funds declined 1.3%, which Goldman characterized as their third-worst day since December 2023. Multistrategy platforms, which are designed to buffer firm-level drawdowns, dropped 1.9%, their second-worst performance since the tariff-driven selloff in April 2025. Asia-focused fundamental long/short managers also lost ground, leaving them down 9.3% for the month to date, although the group remains up 14.2% for the year.
The decline coincided with a sharp move in US equities, with the Nasdaq 100 falling 2.9%, its largest drop since June. According to Goldman, the selling was concentrated in US technology amid growing doubts over whether heavy AI infrastructure budgets will deliver adequate returns, while worries that higher oil prices could reignite inflation added to the pressure.
The session fits a year of sharp swings around AI-linked names. Rallies in companies such as SK Hynix and Micron Technology have been repeatedly interrupted by abrupt declines. Earlier in the year, a slump across technology pushed the hedge fund Situational Awareness to the edge, raising concern that the AI-driven rally could be losing momentum. Goldman's data underscores how factor swings and crowded positioning can amplify losses across the industry at the same time.
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